The FCC may try to undo what the free markets have done according to its annual report. It argues that the concentration in the wireless market is rising quickly, perhaps too quickly.The FCC data indicates that AT&T (NYSE: T) and Verizon Wireless have become too powerful and that Sprint (NYSE: S) and T-Mobile are being pushed off the stage. That is clearly true. AT&T and Verizon each have close to 100 million wireless subscribers. Sprint has less than 50 million and T-Mobile 35 million. In a country where almost every person has a cell phone, the only thing that the industry can do is fight for market share.
AT&T and Verizon’s advantage in the market share race is that they have more capital than their competitors to underwrite the sales of expensive phones. They also have with wherewithal to add infrastructure to improve call volume and quality, although that has not helped AT&T and the bandwidth problems it has with data due to the Apple (NYSE: AAPL) iPhone.
It is Sprint that has taken the initiative and decided to invest billions to be first into the 4G market with WiMax. That would tend to undercut the FCC’s theory about which company can produce technology that will pick up market share. Sprint’s customer service is probably a bigger roadblock to gaining new subscribers than its size. AT&T and Verizon have not begun any significant deployment of the 4G LTE products. The should give Sprint an edge of at least two years.
T-Mobile is a division of Deutsche Telekom, one of the largest telephone companies in the world. If it has not invested more money in the US market to try to build its subscriber base, it is because it does not want to.
The FCC may try to set new rules to “protect” the smaller companies in the cellular business, but, if they need protection, it is because they have been badly run or have not spent enough money to win over customers. Protection could not have prevented that.
Douglas A. McIntyre
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